The Economics of Belonging: Institutions, Participation, and a Structural Reinterpretation of the Capability Approach

This paper develops the Economics of Belonging as a structural extension of the capability approach. It argues that capabilities are not primary units of analysis but outcomes of institutional belonging, defined as the degree of effective participation within institutional structures. The paper integrates insights from institutional economics, social choice theory, mechanism design, and game theory to show that aggregation from individual states is structurally infeasible under conditions of multidimensionality, incomplete information, and multiple equilibria. Within this framework, effective demand is reinterpreted as the macroeconomic expression of belonging, linking participation to growth, market expansion, and structural transformation. A dynamic model is developed in which belonging drives sustained growth through middle-class formation. The paper concludes that the capability approach is best understood as a partial contribution within a broader institutional and relational framework centred on belonging, offering a unified perspective on coordination, inequality, demand, and development.